The participation by churches and church leaders in political campaigns is an American tradition dating back to the founding of the republic. Common examples include:
- inviting candidates to speak during worship services
- distributing "voter education" literature reflecting candidates' views on selected topics
- voter registration activities
- enlisting volunteers for a particular candidate's campaign
- collecting contributions for a particular candidate
- statements by ministers during worship services or in church publications that support or oppose candidates
Unfortunately, it is not well understood that these kinds of activities, as well-meaning as they may be, jeopardize a church's exemption from federal income taxation. This is because section 501(c)(3) of the tax code specifies that a church or other public charity is exempt from federal income taxation only if "no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office."
Note that there are two distinct limitations here. First, churches may not engage in substantial efforts to influence legislation. Second, churches may not participate or intervene in any political campaign, even to an insubstantial degree.
To be sure, there have been massive violations of this prohibition—with not a word of protest from the IRS. In part, this inaction was due to a provision in a federal law (the Church Audit Procedures Act) that imposes limitations on IRS examinations of churches. The Act provides that the IRS may begin a "church tax inquiry" only if an appropriate "high-level Treasury official" (a regional IRS commissioner, or higher Treasury official) reasonably believes, on the basis of written evidence, that the church is not exempt, may be carrying on an unrelated trade or business, or is otherwise engaged in activities subject to taxation.
In 2009, a federal court in Minnesota ruled that the IRS Director of Exempt Organizations (Examinations) was not a "high-level Treasury official" and therefore was not authorized to initiate a church tax inquiry on the basis of a reasonable belief determination that sufficient written evidence existed to warrant a church tax inquiry. The court concluded that only a regional IRS commissioner, or higher Treasury official, qualified as a "high-level Treasury official" as required by the Church Audit Procedures Act. It rejected the IRS's argument that certain lower-level officials were better qualified to make this determination. U.S. v. Living Word Christian Center, 2009 WL 250049 (D. Minn. 2009). This ruling basically shut down IRS efforts to enforce the campaign prohibition by churches.
In recent years, a group of ministers has openly and intentionally defied the campaign prohibition on the ground that it violates their constitutional right to exercise their religion, with little, if any, response by the IRS.
But the IRS’s non-enforcement of the campaign prohibition was legally challenged several years ago. While it still remains to be seen if the agency will enforce the prohibition, church leaders should be mindful of the agency’s protocol.
The FFRF lawsuit
In 2012, the Freedom from Religion Foundation (FFRF) sued the IRS in a federal district court in Wisconsin to compel the IRS to enforce the ban on campaign intervention by churches.
FFRF also sought to remove the roadblocks to IRS enforcement of the campaign prohibition by compelling the IRS to define those officials who are authorized to initiate church tax inquiries. The FFRF complaint states, in part:
The Plaintiff, Freedom From Religion Foundation ("FFRF"), seeks a Declaration … that the [IRS] has violated, continues to violate, and will continue to violate in the future, the Establishment Clause of the First Amendment to the Constitution of the United States by failing to enforce the electioneering restrictions of section 501(c)(3) of the tax code against churches and religious organizations.
FFRF requests the Court to enjoin the IRS from continuing a policy of non-enforcement of the electioneering restrictions against churches and religious organizations.
FFRF also requests the Court to order the IRS to authorize a high-ranking official within the IRS to approve and initiate enforcement of the restrictions of section 501(c)(3) against churches and religious organizations, including the electioneering restrictions, as required by law … .
The IRS may initiate a tax inquiry of a church or religious organization if a high-ranking IRS official documents in writing the acts and circumstances, including potential violations of the electioneering prohibition, that lead the official to reasonably believe that the church may have violated the requirements for tax exemption under section 501(c)(3).
In fact, however, the IRS … has followed and continues to follow a policy of non-enforcement of the electioneering restrictions of section 501(c)(3) against churches and other religious organizations.
As a result, in recent years, churches and religious organizations have been blatantly and deliberately flaunting the electioneering restrictions of section 501(c)(3), including during the presidential election year of 2012 … . More than 1,500 clergy reportedly also violated section 501(c)(3) on October 7, 2012, in a deliberate and coordinated display of noncompliance with the electioneering restrictions of section 501(c)(3), including prominent megachurches … .
Open and notorious violations of the electioneering restrictions of section 501(c)(3) by churches and other religious organizations have been occurring since at least 2008, with churches recording their partisan activities and sending the evidence to the IRS … .
The non-enforcement of the electioneering restrictions of section 501(c)(3) against churches and other religious organizations constitutes preferential treatment to churches and religious organizations that is not provided to other tax-exempt organizations, including FFRF, which are required to comply with the electioneering restrictions of section 501(c)(3) … . The preferential tax-exemption that churches and other religious organizations obtain, despite noncompliance with electioneering restrictions, amounts to more than $100,000,000,000 annually in tax-free contributions made to churches and religious organizations in the United States.
The complaint concedes that some political activities will not violate the ban on campaign activities:
The restrictions of §501(c)(3) on electioneering activities do not preclude discussions of issues that are not linked to support for or opposition to candidates; the fact that candidates may align themselves on one side or another of an issue does not restrict the ability of religious organizations to engage in discussions of that issue. A discussion of issues violates the electioneering restrictions of §501(c)(3) of the Tax Code if the discussion contains overt support for or opposition to a particular candidate.
Factors relevant to determining whether an advocacy communication constitutes impermissible campaign intervention include: (a) whether the communication identifies one or more candidates for a public office; (b) whether the communication expresses approval or disapproval of one or more candidates' positions and/or actions; (c) whether the communication is delivered close in time to an election; (d) whether the statement makes reference to voting or an election; and (e) whether the issue addressed in the communication has been raised as an issue distinguishing candidates for a given office.
The electioneering prohibition of §501(c)(3) applies to tax-exempt organizations, including churches and religious organizations, and to the actions of individuals, including clergy or other religious leaders, acting as representatives of tax-exempt organizations; the prohibition of §501(c)(3) does not apply to the political activities of clergy or other religious leaders undertaken in their individual capacities … .
Settlement of FFRF's lawsuit
The IRS and FFRF reached a settlement of the case that was approved by the court in an order dated July 29, 2014. As a result of the settlement, the FFRF voluntarily dismissed its lawsuit. The court's order reads, in part: "The reason the parties seek the dismissal is that the FFRF is satisfied that the IRS does not have a policy at this time of non-enforcement specific to churches and religious institutions."
The FFRF brief in support of the settlement and its motion to dismiss the lawsuit states:
FFRF commenced this action because the IRS was evidently not enforcing the electioneering restrictions against churches and religious organizations. In particular, the IRS had no procedure in place to initiate churches examinations, at least after the District Court of Minnesota invalidated the prior procedure. After that district court decision in 2009, church groups began politicking from the pulpit openly and notoriously, including annual organized politicking on what has come to be known as "Pulpit Freedom Sunday." In the meantime, an IRS official publicly reported in 2012 an on-going moratorium on church tax examinations, in spite of flagrant and public electioneering by churches and religious organizations.
The IRS has recently, in the context of this litigation, tried to assure FFRF that procedures are now in place for enforcement of the electioneering restrictions of section 501(c)(3), including a procedure to initiate investigations/examinations of churches for possible violations.
FFRF only first received any information from the IRS indicating current practices and policies on June 16, 2014. That is the earliest date that FFRF received any information purporting to reflect IRS policy and practice of enforcing the electioneering restrictions against churches and religious organizations. FFRF's counsel subsequently discussed the IRS's current policy and practices with Department of Justice counsel, and as a result, FFRF is satisfied that the IRS does not have a current policy of non-enforcement against churches.
Information received from DOJ counsel on June 27, 2014, further indicated that the IRS has a procedure in place for "signature authority" to initiate church tax investigations/examinations. Information relating to procedures for processing alleged violations of the political intervention prohibition of section 501(c)(3) was also provided on June 27, 2014.
Based on available information, FFRF and its counsel are satisfied that the IRS no longer has an explicit policy or practice of not enforcing the electioneering restrictions of section 501(c)(3) against churches. For that reason, FFRF is agreeable to a voluntary dismissal of the pending action.
Relevance to Church Leaders
As a result of the 2014 settlement, the IRS’s protocol was publicly disclosed. Church leaders should bear this in mind when considering support of, or opposition to, candidates for public office, and consult with legal counsel to assess the risks and options.